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Cypress Proposes to Buy Ramtron - Analyst Blog

Cypress Semiconductor Corporation
(
CY
) has proposed to buy all of
Ramtron International Corp.
's (
RMTR
) outstanding stock for $2.48 per share in cash, a 37% premium to
Ramtron's closing price of $1.81 on June 11.

Ramtron International is a fabless semiconductor company with
about 35.0 million shares outstanding. This would represent a
purchase price of about $86.8 million. Ramtron supplies
ferroelectric random access memories and has
Texas Instruments Inc.
(
TXN
) and Toshiba Corp. as manufacturing partners. In the first quarter
of 2012, Ramtron reported revenue of $15.0 million with a net
profit of $445,000.

This is Cypress' second attempt to take over its peer Ramtron
International. In March 2011, Cypress tried to acquire Ramtron, but
its offer of $3.01 per share was rejected . Ramtron stock has
fallen 41% over the past 12 months. Though the new formal offer is
lower than the one Cypress made last year, the percentage premium
of 37% remains the same as offered earlier. Soon thereafter,
Ramtron sold almost 20% of its stock in a dilutive public offering
at a net price of $1.79 per share.

Cypress has retained Greenhill & Co. as its financial
adviser and Wilson Sonsini Goodrich & Rosati Professional Corp.
as its legal counsel. It has requested Ramtron to respond to its
latest offer by June 19.

We believe the deal could make sense for Cypress for a number of
reasons. First, Ramtron is a fabless company and would FIT very
well into Cypress' low capex manufacturing strategy. Being a fables
company, Ramtron has the flexibility to move the manufacturing,
assembly and testing of products to vendors that offer superior
technology and services at competitive prices. It also frees up
resources for R&D activity that would otherwise have been
locked up in capital assets.

Second, Ramtron's ferroelectric-RAM (F-RAM) would supplement
Cypress' Memory Products Division, which includes Asynchronous
SRAMs, Synchronous SRAMs and nvSRAMs, and provide a longer-term
roadmap for its non-volatile memory market. The Memory Products
Division segment generated 44% of revenue in the first quarter and
was down 9.1% sequentially due to inventory adjustments and lower
demand from major SRAM wireless customers.

The impact of the deal on Cypress' financials is unknown but
will definitely bring synergies on the sales side.

Cypress is a semiconductor company offering high-performance,
mixed signal, programmable solutions. Though the broader
semiconductor industry was hit late last year by a slowdown in
demand, Cypress had reported double-digit percentage sales growth
bolstered by strong demand for its touchscreen controllers used in
smartphones and tablet computers. Touch sales disappointed in the
last quarter however, resulting in a quarterly loss of 5
cents per share. Management expects a rebound in the current
quarter.

Cypress operates in a highly competitive market. In the
touch-screen market, the company competes with
Atmel Corporation
(
ATML
) and
Synaptics
(
SYNA
).

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